Alex's Outlook

Friday, February 28, 2003

Bush's tax cut, first valued at $300 billion, then $674 billion, and then $697 billion, is now pushing $1 trillion in the House of Representatives, where a 12-vote conservative majority means total control of the chamber by Tom DeLay, the House Majority Leader. If only the Senate were so conservative!

DeLay's strategy is to pass a turbo tax cut to make Bush's proposal seem more moderate. Among the goodies of the bill is 100% first-year expensing of capital investment (ie if you make $1 million in income and buy a $500,000 piece of machinery, you only pay taxes on $500,000 of your income that year.) Not to mention accelerating Bush's 2001 tax cuts and making them permanent, as well as abolishing the double taxation of dividends. Yum.

Unfortunately, the Senate will eviscerate the package. I think Bush will be lucky if he gets complete acceleration of the 01 cuts, a 50% cut in dividend taxes and accelerated expensing for capital investment. A bunch of Republicans - the Maine Twins, Olympia Snowe and Susan Collins, as well as Voinovich, Chafee and McCain - are already whetting their blades. Not to mention most of the Democrats, who would like nothing better than to kill any tax cut so the economy tanks between now and 2004 and GW gets the boot just like his father did.


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